Chamber of Commerce of the United States of America v. California Air Resources Board

Four weeks after denying a motion for a preliminary injunction enjoining two California laws requiring climate change-related disclosures by certain companies, the federal district court for the Central District of California denied a motion by plaintiffs for an injunction pending appeal. The court found that the plaintiffs did not provide a basis for revisiting the court’s conclusions that the plaintiffs did not show a likelihood of success on the merits of their First Amendment challenges or its conclusion that they did not demonstrate irreparable harm.

The district court stayed all proceedings pending resolution of the plaintiffs' appeal of the denial of a preliminary injunction.

The federal district court for the Central District of California denied business groups’ motion for a preliminary injunction enjoining California’s laws requiring certain companies to submit annual reports on their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions (SB 253) and requiring certain companies to disclose “climate-related financial risk information” (SB 261). The business groups asserted that the laws compel speech in violation of the First Amendment. As a threshold matter, the court found that the groups’ First Amendment challenge to SB 253 (unlike other claims they brought) was ripe for review even though the California Air Resources Board had yet to issue implementing regulations. Next, the court declined to alter its prior conclusion that both laws were subject to First Amendment review. The court found that both laws regulate commercial speech but applied a different level of scrutiny to each law. For SB 253, the court found that the Scope 1, Scope 2, and Scope 3 disclosure requirements required reporting only of factual, and not misleading, information. The court also found that the required factual disclosures were “uncontroversial” and therefore determined that it would apply the less stringent Zauderer review standard. For SB 261, the court concluded that the reporting requirements compel disclosure of more than factual information and are therefore subject to intermediate scrutiny. Applying the Zauderer standard to SB 253, the court found that the plaintiffs were unlikely to succeed on the merits of their facial First Amendment challenge because the disclosure requirements are reasonably related to the State’s substantial interests in providing reliable information to investors and in reducing emissions and mitigating climate change. However, the court concluded that the State’s interests in addressing misleading speech and in providing reliable information to consumers would likely not satisfy the Zauderer standard. Applying intermediate scrutiny to SB 261, the court found that the plaintiffs were unlikely to succeed on their First Amendment claim because the State “made a sufficient showing as to the benefits of investors’ desire for the specific disclosures required by SB 261 to achieve the legislature’s objective in reliable information that enables investors to make informed judgments about the impact of climate-related risks on their economic choices.” The court found that the State’s interests in emissions reduction and protecting stakeholders from fraud or misrepresentation would not survive First Amendment scrutiny. The court also found that the business groups did not show irreparable harm in the absence of a First Amendment violation and that the balance of equities favored denial of the preliminary injunction.

The defendant submitted a declaration of the Dow Chair of Sustainable Science, Technology, and Commerce at the University of Michigan regarding "the importance of information in markets, the relevance of environmental disclosure to investors and other stakeholders, and the forms and dangers of greenwashing."

The defendants submitted a declaration of the Director of the Data-Driven EnviroLab at the Institute of the Environment and an Associate Professor of Public Policy and Environment, Ecology and Energy at the University of North Carolina at Chapel Hill regarding "the prevalence of misleading statements in corporate decarbonizing pledges and reporting."

The defendants filed a declaration of a licensed certified public accountant to address statements made regarding the reporting requirements of S.B. 253 and S.B. 261 and to provide "additional information on the reporting of GHG emissions and climate risks as called for under these laws." The accountant had submitted an earlier declaration in July 2024 in support of the defendants' opposition to the plaintiffs' motion for summary judgment.

The President and Chairman of U-Haul Holding Company filed a declaration regarding the impacts of S.B. 253 and S.B. 261.

The federal district court for the Central District of California dismissed the U.S. Chamber of Commerce and other plaintiffs’ Supremacy Clause (preemption) and extraterritoriality claims challenging California’s laws requiring companies to disclose greenhouse gas emissions and climate-related financial risks. The court dismissed the claims challenging the emissions disclosure law without prejudice as unripe because the law did not on its own mandate action by the plaintiffs’ members or other reporting entities and implementing regulations had not yet been adopted. The court concluded the plaintiffs had standing to challenge the climate-related financial risk disclosure law and that the challenge was ripe but found that the plaintiff failed to state either a Supremacy Clause or extraterritoriality claim. Regarding the Supremacy Clause claim, the court found that the plaintiffs did not support the proposition “that a disclosure regime intended to regulate emissions through third-party actions is a de facto regulatory scheme subject to preemption.” The court also concluded that the law’s compelled disclosure was not preempted based on federalism principles in the Constitution, foreign affairs, or the Clean Air Act. Regarding the extraterritoriality claim, the court found that the plaintiffs could not allege that the law discriminated against interstate commerce or had a discriminatory purpose. Under the Pike test, the court found that the plaintiffs failed to plausibly allege a significant burden on interstate commerce. The court dismissed the extraterritoriality claim without prejudice but dismissed the Supremacy Clause claim with prejudice.

The federal district court for the Central District of California denied plaintiffs’ motion for summary judgment on their facial First Amendment challenge to California’s laws requiring companies to make disclosures regarding their greenhouse gas emissions and climate-related financial risk. The court concluded that additional factual development was necessary to determine whether the laws regulate commercial speech so that intermediate, rather than strict, scrutiny would apply. The court said that it would need, for example, information about whether the laws regulate “a substantial number of companies that do not make potentially misleading environmental claims” as well as information about any “real-world examples” of the laws’ overinclusiveness. The court therefore granted the defendants’ motion to deny or defer summary judgment. The court also said it would address the defendants’ motion to dismiss the extraterritorial regulation and Supremacy Clause claims in a separate decision.

The Dow Chair of Sustainable Science, Technology, and Commerce at the University of Michigan submitted a declaration regarding "the importance of information in markets, the roles of mandatory and voluntary disclosure, the relevance of environmental disclosure to investors and other stakeholders, the impacts of disclosure on environmental performance, and the dangers of greenwashing."

The Chief of the Research Division of the California Air Resources Board regarding the scientific literature on climate change.

A faculty member at Emory University School of Law filed a declaration presenting his conclusions from his analysis of S.B. 253 and S.B. 261 ("Disclosure Laws") that "a) in all relevant respects, the Disclosure Laws are comparable to longstanding and well-accepted federal disclosure mandates, which suggests that the information required by the Disclosure Laws is conventional in nature, as are the sources and methods necessary for compliance; (b) the particular tailoring of the Disclosure Laws, including their applicability to certain large privately-held companies doing business in California, is necessary to ensure effectiveness; and (c) as the implicit guarantor of California public pension funds’ obligations to their beneficiaries, the California state government has a compelling interest in ensuring that public pension funds have the climate-related information relevant to their investment decisions and ultimate solvency."

A licensed certified public accountant filed a declaration regarding greenhouse gas emissions and climate risk reporting and S.B. 253 and S.B. 261 requirements.

The U.S. Chamber of Commerce and other business groups filed a lawsuit in the federal district court for the Central District of California challenging two laws enacted by California in 2023: (1) Senate Bill 253, which requires certain companies to estimate and publicly disclose their greenhouse gas emissions, and (2) Senate Bill 261, which requires certain companies to prepare reports on climate change risks. The plaintiffs characterized the laws as a plan “for compelling speech to combat climate change” and asserted that the laws violate the First Amendment, the Supremacy Clause, and constitutional limitations on extraterritorial regulation, including the dormant Commerce Clause. With respect to the First Amendment, the plaintiffs alleged that the laws “compel companies to publicly express a speculative, noncommercial, controversial, and politically-charged message that they otherwise would not express.” Regarding the Supremacy Clause, the complaint alleged that the laws require “sweeping reports” about companies’ emissions and risks, resulting in pressure on companies both in and outside California to reduce their emissions. The plaintiffs asserted that under the Clean Air Act and federalism principles, California lacks authority to regulate greenhouse gas emissions outside of its borders and that the disclosure laws therefore violate the Supremacy Clause. Regarding limits on extraterritorial regulation, the plaintiffs contended that the laws intrude on congressional authority to regulate interstate and foreign commerce and place burdens on interstate commerce that outweigh benefits to California.